Many clients of financial services are surprised at how expensive free can be. Take for instance the free checking offered by many as a way to get low cost deposits. While there are no fees and little if any interest paid, there are significant implications for certain transactions including foreign ATM usage, overdrafts and sometimes for the number of checks written. Senator Chris Dodd is looking to make some sweeping changes to what banks can charge for their free banking products and this has many bankers on edge.
Non interest income has become an important part of the income statement for banks for many years. With margins between loans and deposits being squeezed, this has been the only place that financial institutions can turn to in order to make profits – which is why they are in business after all. So what should bankers expect? Will this end the free checking that has allowed many of the unbanked and underbanked to establish banking relationships? Will banks change their fee structures away from punitive pricing to a more service based one? Will we start seeing monthly fees again for online banking and bill pay, debit card access, and simple monthly account fees? Time will tell how banks respond to the proposed regulatory review of their pricing structures, but they will make the necessary changes to placate any regulatory structure and the reality may be that we all have to get used to paying more to conduct our banking. What do you think?
